Tax on natural gas?

Suddenly people are excited about the U.S. becoming energy independent.  Somehow it seems this happened while I was looking in the other direction.  The reason for the excitement is clearly tied to expectations for domestic natural gas development.  Sunday’s Washington Post, for example, included two pieces dealing with the potential for not only supplying domestic needs for natural gas but also for providing exports to world markets.

One of these, a column by Steven Pearlstein, reviews the debate over allowing exports vs. keeping supplies at home.  The former means prices will go up while the latter would keep them lower.  Pearlstein favors allowing exports but, at the same time, applying a federal tax at the wellhead to limit gas company profits and ease the impact of higher prices on consumers.

The idea of the tax, whatever its political possibilities, seems a good one.  But what if it were made part of a broader, longer-term policy of energy independence?  The U.S. does have the potential for very large natural gas supplies.  But even if all of the “technically recoverable” supplies became available, the U.S. Energy Information Agency estimates that, at current consumption rates, these would supply domestic needs for 92 years.  That’s a long time, but it’s not forever, far from it.  It’s likely that many of the babies born today will live that long.  And, although gas-fired power plants pollute less than do coal-fired plants, as the Natural Resources Defense Council points out, natural gas is still a fossil fuel and it’s use does add CO2 to the atmosphere.

My sense is that most of the debate over natural gas production has concentrated on “fracking” techniques and their environmental risks.  These are important issues.  From what I can tell, most regulation has been left to the state governments, who have been more interested in tax revenues than environmental protection.
 
Meanwhile, domestic production of natural gas has increased remarkably to the point that there is now this pressure on the Energy Department to license exports.  This makes Pearstein’s tax proposal really interesting.  But I would hope that the discussion about any tax -- if there is any discussion -- would be connected to plans for an energy transition involving more efficient use (i.e., conservation) and renewables.